ICON PLC (ICLR) 2016 Q2 法說會逐字稿

Good day and welcome to the ICON plc Q2 2016 conference call. Today's conference is being recorded. At this time, I would like to hand the conference over to Simon Holmes. Please go ahead.

Thank you, Marian. Good day, ladies and gentlemen. Thank you for joining us on this call covering the quarter ended June 30, 2016. Also on the call today, we have our CEO, Mr. Ciaran Murray; our CFO, Mr. Brendan Brennan, and our COO Dr. Steve Cutler.

I would like to note that this call is webcast and there's slides available to download on our website to accompany today's call.

Certain statements in today's call will be forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the Company's business and listeners are cautioned that forward-looking statements are not guarantees of future performance. The Company's filings with the Securities and Exchange Commission discuss the risks and uncertainties associated with the Company's business.

This presentation includes selected non-GAAP financial measures. For the presentation, and the most directly comparable GAAP measures, please refer to the press release statement headed Consolidated Income Statements, Unaudited, US GAAP. While non-GAAP financial measures are not superior to, or a substitute for, the comparable GAAP measures, we believe certain non-GAAP financial information is more useful to investors for historical comparison purposes.

With have limited the call today to one hour. We therefore ask participants to keep their questions to one each, with the opportunity to ask one related follow-up question.

I would now like to hand over the call to our CFO, Mr. Brendan Brennan.

Thank you, Simon.

Q2, we achieved a record level of business wins. Gross awards were $622 million, and our net awards were $502 million. Translations were $120 million, or around 3% of our opening backlog. This is higher than we have seen in recent quarters, but still within our historic range of 2% to 4% of opening backlog. The primary driver of cancellations was the termination due to safety and efficacy concerns of a large oncology program.

The growth in new business wins in the quarter meant that our net book-to-bill was 1.22%, and we grew our backlog year on year by 8.6% to over $4 billion. Net revenue in Q2, 2016, was $411 million. This represents year-on-year growth of 5.7%, or 5.3% on a constant currency basis. On a constant dollar organic basis, year-on-year revenue growth was 3.1%.

Our client concentration continued to improve in the quarter, with our top client representing 28% of revenue, compared to 31% for the full-year 2015. Our top-five clients represented 46% compared to 49% last year. Our top 10 represented 59% compared to 63% last year, while our top-25 clients represented 77% compared to 78% last year. This continued diversification of our customer base meant that, outside our top account, revenue grew 8.6%, year on year.

We added around 100 new staff in the quarter, which meant we ended the Q2 with approximately 12,300 staff. Group gross margin for the Q2 was 42% compared to 42.9% in Q1 and 42.1% in the comparable quarter last year. We delivered further operational efficiencies in the quarter by leveraging our global business support model, and as a result, SG&A was 19.5% of revenue. This compared with 20.2% last quarter, 20.9% in the comparable period last year.

Operation income for the quarter, before non-recurring charges, was $78 million with an operating margin of 19%. This compared with 19% last quarter and 17.5% in the comparable quarter last year. Net interest expense for the quarter was a $2.8 million compared to net interest expense of $2.9 million last quarter and $10,000 in the Q2, 2015. The effective tax rate in Q2 was 14%.

Net income for the quarter before non-recurring charges was $64.7 million, a margin of 15.8%, equating to earnings per share of $1.14. This compares to earnings per share of $1.12 last quarter and $0.95 from the comparable quarter last year. An increase of 20%.

DSOs in the quarter were 46 days compared to 47 days last year, sorry, days last quarter, and 45 days in Q1, 2015. During the quarter, our cash generated from operating activities was $16 million and capital expenditure was $12.2 million. As a result, June 30, 2016 the Company had net debt of $97 million, compared to net debt of $100 million at December 31, 2015, and net cash of $132 million at the end of June 2015. During the quarter, we also took a restructuring charge of $4.1 million, as we continue to improve the efficiency of our operating model.

With all of that said, I would now like to hand over to Ciaran.

Thank you, Brendan. Demand in market continues to be healthy across all of our segments. In the quarter, we saw increased awards from large pharma customers, alongside a continuing flow of business from midsized specialty pharma and medical device companies. As a result, we see a record of net new business awards, which exceeded $500 million for the first time in a single quarter. In addition, we successfully renewed our MSA with Pfizer, and we look forward to continuing our relationship with them to help advance their development pipeline.

Our success in maintaining our current customers and in winning new business results from a consistent, strategic focus on operational excellence and having the right scale, services, data, and enabling technologies that our clients need to enhance their development efforts. As part of our overall strategy to grow within new markets and diversify our customer base, we announced an agreement to acquire Clinical RM during the quarter. Clinical RM will provide ICON with a platform to further penetrate the market for government and NGO-sponsored research.

We continue to enhance our service offerings. Through our PMG Research network, we were able to leverage patient data within partner healthcare systems to improve patient access to trials, so we get faster patient recruitment times for our sponsors. This is a critical challenge within clinical development and is an area where ICON has a differentiated solution.

Our targeted-data strategy has led to partnerships with IBM Watson, EHR4CR, and TriNetX that will also help us to find the best sites with the most suitable patients. Once these sites and patients are identified and recruited onto our studies, our unique Firecrest technology platform is enhancing the engagement with these sites and patients throughout the trial lifecycle.

We continue to leverage our other differentiated technology platforms (inaudible) and ICONIK to enhance sponsored development programs and [plan to align] more efficient, adaptive trial designs, and using ICONIK, our project teams are analyzing clinical data in real-time to deliver innovative, risk-based monitoring solutions that are significantly reducing trial monitoring costs.

We continue to deploy our capital to maximize shareholder value. As we have in the past, this will be done through a combination of bolt-on M&A and share repurchases. And at our recent AGM, we gained shareholder approval to buy back shares. We will implement a share repurchase program of up to circa $400 million, which will be completed over the next 18 to 24 months, depending on the funding and timing needs of our M&A pipeline.

As we look forward to the rest of the year, I want to take this opportunity to reaffirm 2016 earnings guidance in the range of $4.60 to $4.80 and to provide revenue guidance to the range of $1.665 billion and $1.680 billion. This reflects the revenue impact of Q2 cancellations; the acquisition of Clinical RM, which we expect to close at the end of Q3 and the commencement of the share repurchase program in Q4.

Before moving to Q&A, I'd like to thank the entire ICON team for all of their hard work and commitment during the quarter. Thank you everyone, and we are now ready for questions.

Thank you.

(Operator Instructions)

We will take our first question from John Kreger from William Blair. Please go ahead.

Good morning. Ciaran, a question.

I know that the Brexit vote happened after the end of the quarter, but curious if you've seen any impact on that, or think it might be an impact in the next quarter or two? I guess it would be the most relevant for your European clients.

Thanks.

No, John, we haven't seen any impact for the Brexit vote, and we don't expect to see any impact of the Brexit vote in the foreseeable future, if ever. We have a pretty global business, our customer mix is also global.

We have a very small percentage of our total operation in the UK. I think we have 695 people there out of our 12,500 working on trials, and the majority of our customers are non-UK. So, no. Nothing there to report on that front, I'm happy to say.

Great thank you. One follow-up. You can give us an update on the site network strategy in the PMG business? Have you been able to add any additional affiliated site products? Just how you expect that to rollout would be helpful?

I'm struggling with the follow-up logic there, John, from Brexit to site end-patient strategy.

(Laughter).

While I reflect upon that, I'm going to let Steve take this question, as he's closer to it than me.

John, Steve Cutler here.

We are continuing to add sites on the platform of the PMG acquisition that we made earlier in the year. That is an ongoing process in North America. We are also looking at opportunities in Europe, as well. That is continuing well. We are looking to focus in oncology, where we believe there is certainly a key unmet there and are making some solid progress there in bringing on new parts and sites within the network. As I said, it's foundational for PMG.

Great. Thank you.

We'll now take the next question from Sandy Draper from SunTrust.

Thanks very much for taking the question.

I guess the first question is could you quantify what you expect the impact of acquisitions to be in the second half of the year? I think you said you expect the CRM business to close in the beginning of the fourth quarter. So just trying to get a sense of how much impact that is going to have?

Hello, Sandy, it's Brendan here. At the moment, we expect it to be a revenue impact of a circa $17 million, depending on timing obviously, with very little earnings impact at this stage.

Most of that being Q4, I think is what we should say.

Okay. So $17 million a quarter, and is that as reasonable -- think about that as sort of a run rate, as we think about -- (multiple speakers)

That $17 million is in the second half of the year, Sandy. So, depending on the exact timing, at the end of Q3, when it closes, it might be about $15 million a quarter, I think it is a reasonable run rate, yes.

Great, and follow-up, and I'll try to make a loose connection, just because I'm talking revenue. You didn't give the comment in the slides about the expected backlog earned in the next 12 months or a percentage of backlog. Are you willing to provide that number?

(Multiple speakers).

We changed the format, Sandy. Sorry, We're both excited to tell you. (Laughter). We changed the format, and it's actually there on one of the slides, but Brandon, you can disclose the number of them.

Obviously very excited. It is there on the slide, Sandy, it's just in a different part from the backside slide. It's 75%.

So 75% coverage, but can you give the -- historically, you've given, say -- last quarter I think was 32.7% of backlog was expected to be earned in the next 12 months. I don't know if you're willing -- that number is the number I did not see, sorry.

What we're saying there, Sandy, is that we have, from our perspective at this stage, 75% of the next 12 months revenue in backlog, as we stand at the end of Q2.

Okay, great. Thanks a bunch.

Thank you.

We'll now take the next question from Robert Jones from Goldman Sachs.

At first, on Pfizer, congratulations on the renewal. It looks like the revenue from Pfizer has been flat in the last three quarters or so, at least on a dollar amount basis. Now that the renewal is complete, any expectations you have as far as seeing bookings and maybe revenue pick up or accelerate, going forward?

We expect to see bookings pick up, Bob. Our bookings with Pfizer have been lower in the first half of the year than they have been for some time, but that was expected with some work that Pfizer were doing themselves and their own potential transaction in Q1 and then the process of going through the renewal of the MSA.

So we had another relatively modest quarter of business wins from Pfizer, which is good because we had a record booking this quarter without significant business from our largest customer. And the good news is that we are having lots of discussions with them and looking at the pipeline and we will start to see those bookings pick up in the second half of the year and into next year.

However, commentary's been pretty clear on the revenue from Pfizer for quite some considerable time, in that the way that deal was structured there was a very significant amount of transition work that came in in 2011 and 2012, which created of bolus of revenue, which we've been saying for some time had matured and moderated. So we are expecting that the Pfizer revenue, as we go forward, to be flat or modestly declining as that bolus works itself through.

We're winning considerable amounts of new work from Pfizer -- will still remain, by some way, to be our largest customer, and that's to say we're excited by the work that is in the pipeline. So bookings will pickup, but revenue will continue to follow the path that we have seen over the last number of quarters.

Got it, and I guess as my follow-up, as it relates to the P&L broadly, if I look at operation margins, they are flat, sequentially. Guidance looks like it's calling only for a modest increase in profitability in the back half. Ciaran, just any longer-term thoughts on where we can see operating margins go over time? It looks like, obviously, the conversation may be shifting out beyond 2016, but are there remaining buckets of efficiency left for you to drive margins?

I think there are always places that you can look for operating efficiencies, Bob. As you know, I am a great believer in the fact that every ceiling becomes your floor. The way we view the operating margin lever is to view it in connection with revenue, and to see both of them really as a means to get to earnings, which is our ultimate target.

So when we look at where margin will go in the future, it has to be viewed in the context of what the growth ambition is. We have historically, if you looked at times of high growth, seeing a little bit of margin pressure. You are adding resources ahead of the curve. You're making investments in your business. We also look at the mix of our business, so we're going to new markets and we have a portfolio of businesses with different margin profiles. Where we go beyond 2016 in terms of strategic direction in markets will also impact the margin possibility.

And then of course you have technology, how we drive efficiencies. We've been very successful in building a very scalable and global business model. We continue to expect that will be scalable, and very leverageable in the context where topline grows; that will grow significantly faster than our support costs. Therefore we get leverage there. There are a lot of moving pieces here, and I think, as we play the chess game towards the end of the year and move towards our strategic planning cycle and looking towards the future, we'll move all of those pieces together to come up with a plan that increases earnings.

Got it. Thanks so much for the questions.

We will take the next question from Tim Evans from Wells Fargo Securities.

Thank you.

I wanted to come back to the M&A piece a little bit. I wasn't expecting Clinical RM -- kind of a push into the government NGO market. Could you just talk a little bit about -- is that a market that you see as a growth opportunity? Secondarily, what deal accretion, EPS accretion, do expect the first year after close? And then third, how much stuff is in your M&A pipeline that may be different than the deals that you've done in the past? Thanks.

Tim, what I'll do -- I'll get Steve to address your first question, and then Brandon can talk about the deal accretion, and maybe I will talk a little bit about the M&A pipeline. Maybe Steve, if you want to kick off first?

Sure. Tim, Steve Cutler. We looked at the government market fairly carefully, and it is a different market, but it's certainly a very large one, and we believe it's not one that's served particularly well. There's an opportunity there. So it is significant, it fits our core competencies in terms of there a lot of vaccine, anti-infective type work; we believe we are well-placed to be able to do that.

We were awarded the best vaccine CRO a year or two ago, and so we have got some great capabilities in that area. We believe we're well-placed to do it. We've recruited some good people who understand that market well. It is a little different, but it's one we believe there is a significant growth opportunity and we are going to take advantage of it.

Okay, thanks Steve. Brendan, do you want to a talk a little bit?

Yes. For a full year's accretion, Tim, taking on the amortization, obviously, in the first couple of years, we expect the full-year accretion to have about a $0.05 impact on earnings for the full year.

So pretty minimal on this year's financials. On the M&A pipeline then, Tim, our strategy has always been bolt-on M&A. It's been geared -- providing us with an organization which, in its totality, is very attractive to our customers to make them to want to pick us as being their trusted development partner. Their go-to CRO of choice.

So we've sought to have a full range of geographic footprint for the range of services across the development spectrum. Really laser-like strategic focus on operational excellence in project delivery supported by technology enablers, which we have which are very innovative, supported by a good, high-quality targeted data asset. So we haven't really changed the fundamentals of that strategy.

Clinical RM is fundamentally within the development space, it is just in a different market segment that we've been in. But if you saw last year, we also pushed into the medical devices market segment for the first time significantly, and indeed have had some success in that in recent quarters. So it's really just an extension of us looking at what defines our market (inaudible), and our focus will then continue to be around the core skills of site and patient access and data and enabling technologies. Perhaps some niche services and geographical info, from an opportunistic basis.

Thank you.

We'll now take the next question from Eric Coldwell from Baird. Please go ahead.

I have got a new one I didn't expect. On the comment on Clinical RM accretion, I just want to make sure everybody is on the same page. You said full-year accretion of about $0.05, but you meant the first 12 months of that deal closing, not 2016, correct?

That's correct.

Okay. So maybe a penny or so this year. Okay, so the second question is jumping off of a couple of the others. Just very specifically on -- and I know you don't prefer to talk about your largest client and contracts, but the Pfizer deal has been so visible -- I'm just wanting to reverify that the existing backlog terms and conditions are unchanged and that any impact from the renewal was not felt in this quarter's profitability and would not be a major impact for the second half of the year? I'm still getting a lot of questions on that topic, and I just want to reverify where we are with that renewal and that the terms and conditions came out as you expected them to?

I think from the record, Eric, as saying the terms of conditions came out where we expected. We were happy with the deal. Pfizer was our first customer at ICON 26 years ago. We've been working together a long time over that period. Deal's re-signed, we're looking forward to working on it; we're happy with the terms and conditions. And, that is really all I can say, but I think people should be happy with that, you know? We are.

Okay. Thank you very much for the -- (multiple speakers)

I should add to your specific question, there was no impact in Q2 of anything to do with that, nor is there expected to be anything in the rest of the year.

That is what I expected, but I just want to make sure everybody is clear on that because the topic keeps coming in. Thanks for the response on that.

We'll now take the next question from Erin Wilson from Credit Suisse.

I just have a quick follow up to that, and maybe you can't speak to any more than you just did, but any detail on the differences between the Pfizer contract now versus before? At least anecdotally, what type of business are doing with them? Is it more or less profitable mix that it was previously?

It's very much the same business that we were doing before, Erin. We have a considerable amount of backlog with them, which we are continuing to do in the same way that we did it before, and new awards as they come in are very much across the same business areas and therapies. And we're one of their key development partners and that, so there's fundamentally no significant difference in the way -- in the nature of the business that we are doing.

Okay, great. And can you speak to the demand trends across the small-to-midsize biotech market, and more broadly, can you speak to the RFP environment and pricing trends across the industry? Thanks.

We are seeing healthy RFP flow across the industry. Our formula is good. We are happy with that, and obviously was good in Q2, (inaudible) posted the bookings, we're seeing that kind of environment. I think I said in my opening comments that we're continuing to see demand be healthy across all of our segments.

That includes small and midsized and biotech companies, and there is no real difference in the normal contrast of our business around how we price business and how we cost it. Pricing has never been the first thing on anybody's list, and when it comes to RFPs, we're working for customers who are making considerable investments in developing assets, which are key to the future.

The whole value proposition is about taking time and cost out of the development cycle, and thus allowing more days left on the patent life for when the customer gets the product to market so that they can maximize their revenue opportunity. And of course across the total cost of a study, the key differentiator is the total cost, and that is around how you can deploy technology, how you can be more efficient, how you can take our time, how you can improve return on investment.

That has been the story for quite a long time. We don't see any change in that dynamic in the market at the minute.

Great. Thank you.

We'll now take the next question from Jonathan Groberg from UBS.

Great, thanks a million and congratulations.

Just two quick industry questions. One, when it comes to your revenue conversion, you've had some people start to talk about when they expect this impact of the complexity of the trials to begin to normalize. So, I'm just curious when you expect your revenue conversion to begin to normalize again?

And then the second is -- if you look at your business and your growth in gross bookings, what percent of that is coming from clients where you already are a preferred provider versus winning new business and you are becoming a preferred provider at new customers?

Revenue conversion, Jon, you say normalize. I don't know if anybody has established what the norm is going to be. These are all pretty complex drugs and trials in the world at the minute. What I can say is that I expect us to hover around where it has been for the last few quarters, 10.3%, 10.4%. Certainly into the foreseeable future, throughout the rest of this year and early into next year, which is around our forecasting horizon at the moment.

So no change there. The second question, you are going to have to refresh my memory? What did you ask me there?

It's a little bit of trying to understand how the world is evolving given the number of deals that have been announced from a competitive standpoint. But just from a gross bookings standpoint, are these wins where you are already a preferred provider, or are you winning new business at places where you were not winning business previously?

It's both. If you look at our world, 25% -- 25 customers produce 76%, or something historically, of our revenue. So, as you can imagine, a lot of our business every quarter comes from our existing [topicans] and strategic providers. But in this Quarter Two I would say for the last -- the best part of seven or eight quarters now, we've very successfully increased the bench of our customers and added new customers. Again this quarter, we have quite a bit of that business coming from some new relationships. So it is good news all around.

I guess I'm trying to clarify, are those one-off wins, or are you becoming a preferred provider, more of a strategic provider at these new accounts?

Some of it is strategic. If you look at the market, Jon, I think you can get hung up here on maybe trying to parse it too much. A considerable amount of the market is still transactional. A lot of the topic and strategic, that is moving into mid-tier. So in our new accounts, some of them are strategic and some of them are transactional. And if you looked at how much money has been in the market over the last while for smaller biotech companies and specialty companies, they tend to have a more limited portfolio, so the business tends, by nature, to be a bit more transactional.

Great. Thanks.

Yes.

(Operator Instructions)

We'll now move to the next question from Donald Hooker from KeyBanc. Please go ahead.

Great. Good morning, good afternoon.

So I wanted to also follow up on some detail on this Clinical RM acquisition. I was a little surprised by the limited EPS contribution. You are saying $0.05 EPS contribution in the first 12 months. Can you provide a little more detail on the acquisition price and the amortization, sort of the non-cash amortization on that? And maybe some elaboration on why it might appear here that the margins on that business are much lower?

I suppose it's fair to say that we always forecast and act conservatively in the first year of any of our acquisitions. So the strategic rationale behind an acquisition like this is that it moves us into new markets, and that, as we integrate the companies, we can harvest further down the line more potential from the market.

So what we would say is that Clinical RM have really excellent market presence that market. Excellent expertise. You combine that, then, with our global footprint and capabilities and you get a chance to outgrow the normal growth rate in the industry and the market. But it doesn't happen in our business in 12 months. It's a complicated, demanding business we are in, and we have to integrate the companies, put them together. So our forecast for the first 12 months always tends to be to reflect that reality.

The margin itself in that business is at a lower margin than say the more commercial technical research, but it tends to be very good business. It's government, it's NGO. They are large contracts. They tend to run a long time. They're very stable, almost an annuity-based contract. So you get very stable contracts with a -- running a long time, there's a good size in the market. They're very interesting and cutting edge areas of research, so it is good to improve our own staff capability and it's good, exciting work to do. It grows with the intellectual capability in part of the company.

So they are all good things. The margin is a little bit lighter, but that is okay. We're not disclosing the purchase price and amortization stuff like that, but it is well within our normal range of multiples of what we pay. We haven't paid -- it's not low because we paid some phenomenal outside-of-market-range price or anything like that.

So. Maybe just in my follow-up on a separate topic, I think topical topic, the concept of wage inflation. Looking at gross margins and thinking about gross margins in the next quarter or two or going into 2017, can you update us on where wage inflation is around CRAs, particularly in the United States?

It's no different now than it has been. We have CRAs and across, like, 90 offers in 40 countries. Sometimes some of them are a bit hotter than others, but across the portfolio of the business, it isn't any different at the minute than it was 12 months ago or 24 months ago or 36 months ago, and it will have no more or less impact on margin than it has had in the past. That is not a factor I would expect to influence margin.

Thank you.

We'll now take the next question from Ross Muken from Evercore ISI.

Hey, it is Luke in for Ross. Just a quick clean-up question, I think. Did you call out the contribution of the M&A in the quarter to revenue?

We did on the -- do you mean the constant dollar organic revenue growth, Luke?

Yes.

We said, constant dollar organic, we were up 3.1% year over year.

Okay, thanks. Just missed that one. As a follow-up, you have done very well with your emerging biopharma and the small tech -- biotech growth. You put up I think a 1.4 book-to-bill last quarter. Can you care to discuss whether that is more share gains or just the white-hot -- that small-market growth?

I'll ask Steve to maybe comment on that.

I would say it's probably a little bit of both, to be honest. The availability of funding has been strong. Traditionally, it has tapered off a little bit more recently, but we have seen certainly plenty of good signs being funded and we have been the beneficiaries of that. And we've also been focusing in that area as we've built out there. So I would say a little bit of both, I believe, the answer to your question.

Thank you.

We will take the next question from Tycho Peterson from JPMorgan.

Thanks. Sorry to make you do this, but can you just maybe walk through the bridge to the guidance reduction? The acquisition is going to add I think $15 million in the fourth quarter. You brought down guidance by $25 million at the midpoint. So a net reduction of $40 million. Is that all tied to the cancellations, which picked up a bit, $120 million in this quarter, or is it FX and other dynamics we should be thinking about, as well?

It's about half or thereabouts of the impact of the cancellations, Tycho, and the other half is really just that we had expected a slight ramp up in our conversion rate in the second half of the year from the book of business that we've won over the last year and our new customer base, and just due to the complexity of some of those studies and that. As we've seen in the industry, that is not ramping up as we expected. So half of it from the cancellations and the other half just that we didn't forecast accurately enough the conversion of the new business.

And then can you, Ciaran, maybe break out the backlog conversion outside of Pfizer? Both B2B action and backlog conversion I know is around 1.4 in the past. Does that remain pretty consistent?

Backlog conversion or book-to-bill? Sorry.

Both, outside Pfizer.

Are you talking about our bookings or our backlog conversions?

Book-to-bill. Yes, why don't you start with book-to-bill?

We don't split out backlog conversion across the portfolio. The book-to-bill has been strong on that side Pfizer. Again, it would've been just over 1.4.

Okay. And then, the restructuring you noted, was that kind of a one-off in the quarter, or are there broader changes afoot?

If you look back, our business is not static and what we tend to do every couple of years -- we look at where our infrastructure is and make sure we have the right resources in the right places. It's not a precursor to any significant restructuring. But I would imagine over the next few quarters we will be continuing to tweak things to a modest level, so you might see small restructuring charges in the next quarter or two.

Lastly, I know you had a question earlier about trial complexity -- (multiple speakers)

We're trying to restrict it to two questions, Tycho.

Alright, I will hop off. Thanks.

We'll now take our next questions from Greg Bolan from Avondale Partners.

Thanks guys. Just a couple of housekeeping questions.

Ciaran, I think you had mentioned that some of the assumptions around the buyback, one of which was it would take place or begin in the fourth quarter, but 18 to 24 months is on the horizon. Is there any -- what is the estimated impact to EPS guidance from the buyback? Is there anything in there?

There is basically -- while we're talking about Q4, to start is that we are closing the clinical RM acquisition in Q3. So will be what we are doing in Q3. By the time we start in Q4, you might see an impact of maybe a penny this year, but it won't be any more than that. Almost nothing.

Why we're talking about 18 or 24 months, as we've done in the past, we're going to balance this with our M&A pipeline requirements and you're never quite sure how that is going to go. It might be a little quicker if we didn't move forward some of our M&A acquisition targets. But depending on how that goes and the inherent uncertainty will influence the timing of the buyback.

Great. Thanks, that is helpful. Lastly, the spread between the low end and the high end of EPS guidance, if I go back four or five years, it's typically narrowed around this time frame, or narrows progressively throughout the year, but certainly after the second quarter. Is there maybe a reason why there is still that kind of wide gap between the low end and the high end?

There is not really a reason why, Greg. We just didn't want to change it, it might reflect to the complexity of business these days, and maybe I'll look at Brendan just to talk about that?

I think the range is there, but it still reflects an appropriate margin as we model out to the back end of the year, both the top and bottom end, so we didn't feel it was necessary at this stage to narrow it too much.

Great. Thanks.

As there are no further questions, I would like to hand the call back over to Ciaran for any additional closing remarks.

Thank you, Marian. Thank you, everyone, for listening today. I have to say we are pleased with our performance of Quarter Two. We look forward to building on this during the rest of the year as we build our position as the CRO partner of choice in drug development. Thank you, everyone.

That will conclude today's conference call. Thank you for your participation.

Ladies and gentlemen, you may now disconnect.